UPDATE 2-Osram sees more cuts ahead as traditional lighting sales fade

Wed Jul 30, 2014 9:03am EDT

* Osram announces second major cost-cutting programme

* Says compulsory redundancies not ruled out

* To shut more factories, cut almost 8,000 more jobs

* Shares drop more than 5 percent to bottom of MDAX (Adds CEO comment on pricing, background)

By Maria Sheahan

FRANKFURT, July 30 (Reuters) - Germany's Osram Licht AG expects to cut more jobs in future as customers switch to new lighting technologies such as LEDs more quickly than expected, its chief executive said, a day after unveiling plans for almost 8,000 job losses.

"We always said that the decline of the market for traditional general lighting will continue. That means that we will take measures even beyond what we announced," Wolfgang Dehen told journalists during a conference call on Wednesday, adding he could not yet say how many more jobs could go.

Light-emitting diodes (LEDs) are rapidly gaining in popularity as they are more energy efficient and longer-lasting than traditional lighting such as incandescent bulbs, and as a price war among manufacturers makes LED technology more affordable.

Osram has struggled to adapt to the shift and announced its second major savings drive late on Tuesday, bringing its overall headcount reduction to almost 17,000, and said it would shut more factories.

In its fiscal third quarter through end-June, LED accounted for 38 percent of group revenue, up from 31 percent a year earlier and broadly in line with top rival Philips.

Osram's stock was down 5.4 percent to 32.235 euros, at the bottom of Germany's mid-cap index, at 1245 GMT as investors worried the restructuring would weigh on profits in the coming years.

"All in all, the bad news appears to be out now," Kepler Cheuvreux analyst Peter Olofsen said, while adding he couldn't see an upside for Osram shares amid the radical industry shift.

RAPID DECLINE

The decline of traditional lighting sales at Osram accelerated to 19 percent in its third quarter to the end of June, from 13 percent in the second quarter.

"I think the whole industry is surprised by the fast decline in traditional products," Osram CEO Dehen said.

Lighting makers are also grappling with a price war in the LED market as chip-based technology has allowed new competitors - such as South Korea's Samsung Electronics and Japan's Toyoda Gosei - to grab market share.

According to research firm IHS Technology, the average retail price of LED lamps was 11.8 percent lower in June 2014 than a year earlier.

Philips said last week it was speeding up the transformation of its lighting business, which includes the spin-off of lighting components, as quarterly sales of traditional lighting products dropped by 13 percent.

Osram's management now faces tough negotiations with powerful German labour union IG Metall over the 1,700 job cuts planned for the company's German operations, as CEO Dehen said compulsory redundancies could not be ruled out this time.

Osram, the top supplier for automotive and display lighting, had 34,000 employees around the world at the end of June.

Osram's stock is still up a third from its listing last year, when it was spun out of engineering group Siemens , but has declined by more than a quarter over the past six months as concern grew that further restructuring measures would become necessary.

UBS cut its recommendation on Osram's stock to "neutral" from "buy" on the prospect of three more years of restructuring and said it would recommend a break-up of Osram to lift value for shareholders. (Editing by Arno Schuetze and Mark Potter)